Syria dispute set to overshadow G20 talks on economy

September 04, 2013|Reuters

* Obama, Putin trade barbs ahead of summit

* G20 loses cohesion as economic crisis manager

* Emerging markets fret over dollar resurgence

By Timothy Heritage

ST PETERSBURG, Russia, Sept 5 (Reuters) - A potentialshowdown over Syria between U.S. President Barack Obama andRussia's Vladimir Putin could overshadow a meeting of worldleaders on Thursday on how to revive the global economy.

At a summit which Putin is hosting in a tsarist palaceoutside St. Petersburg, the Group of 20 developed and developingeconomies will try to forge a united front on growth, trade,banking transparency and fighting tax evasion.

The club that accounts for two-thirds of the world'spopulation and 90 percent of its output is divided over issuessuch as emerging market turmoil and the Federal Reserve'sdecision to end its programme of stimulus for the U.S. economy.

But no rift is wider than the one between Obama and Putinover possible military intervention in Syria, and bothpresidents turned up the volume on Wednesday.

Obama used a visit to Sweden to build his case for amilitary response to the "barbarism" of a chemical weaponsattack on Aug. 21 which Washington blames on Syrian forces loyalto President Bashar al-Assad.

Obama, who is seeking approval for military strikes fromCongress, said: "My credibility is not on the line. Theinternational community's credibility is on the line.

"And America and Congress' credibility is on the line,because (otherwise) we give lip service to the notion that theseinternational norms are important."

Putin said Congressional approval without a U.N. SecurityCouncil resolution would be an act of aggression, and accusedSecretary of State John Kerry of lying by playing down the roleof the militant group al Qaeda with rebel forces.

"Our opponents' arguments are very weak. To be honest, theyare non-existent," Putin said in Moscow.

Putin's comments dimmed prospects of a compromise which hadbeen raised when he said in an interview he did not rule outsupporting military action - if it was approved by the U.N.Security Council and there was proof Assad's forces had resortedto chemical warfare.

Foreign ministers from key states in the G20 - whichincludes all five permanent Security Council members - willdiscuss Syria on the sidelines of the meeting although it is notformally on the summit agenda.

The G20 lacks the powers of the Security Council, but Putinwould like to see a consensus to avert military action in whatwould be a significant - but unlikely - diplomatic triumph forRussia, Syria's key arms supplier and international ally.

LACK OF HARMONY

The G20 achieved unprecedented cooperation between developedand emerging nations to stave off economic collapse during the2009 financial crisis, but the harmony has now gone.

There are likely to be some agreements - including onmeasures to fight tax evasion by multinational companies - atthe summit in the spectacular seafront Peterhof palace complex built on the orders of Tsar Peter the Great.

An initiative will be presented to leaders on refiningregulation of the $630 trillion global market for financialderivatives - such as futures, options and swaps - to prevent apossible markets blow-up.

Steps to give the so-called 'shadow banking' sector until2015 to comply with new global rules will also be discussed.

But consensus is proving hard to achieve among developedeconomies as the United States takes aggressive action to spurdemand and Europe moves more slowly to let go of austerity.

Meanwhile, emerging economies in the Brics - Brazil, Russia,China and South Africa - are divided over the role of the U.S.dollar in the world economy.

And there has been no sign of them rallying behind the fifthBrics member, India, after it called last Friday for jointcurrency intervention.

The International Monetary Fund will call at the meeting forstrengthened global action to revitalise growth and bettermanage risks, an IMF document obtained by Reuters showed.

Advanced economies led by the United States willincreasingly drive global growth while emerging countries are atrisk of slowing, due to tighter U.S. monetary policy, it said.

"The greatest worry may well be a prolonged period ofsluggish global growth," the IMF said.

But with the United States and other advanced economiespicking up speed, the IMF said it still expected global growthto accelerate in 2014 from this year, helped by the highlyaccommodative monetary conditions in the rich world.

Former Russian Finance Minister Alexei Kudrin also urgedcaution, warning of the threat posed by debt and suggesting themain problems of the global financial crisis may not have beenovercome yet.

"We aren't in a recovery - we have just won a breathingspace," he said.

Further friction on the fringes of the summit could becaused by Obama's plans to meet human rights activists includingmembers of a gay rights group which staged protests against alaw Putin signed banning "gay propaganda" among minors.

The law has been widely criticised in the West and is one ofthe areas on which Russia and the United States have fallen outas relations deteriorated this year and Obama pulled out of ameeting with Putin that would have been held on Wednesday.